New Homes Fall To WWII Levels

Even though this is bad news today, it is the only way to reduce inventory and stabilize prices.

Construction of new homes plunged 4.5 percent last month to the lowest level on government records dating back to 1959, as U.S. builders slashed production while Wall Street nosedived. Building permits, a barometer of future activity, also plummeted to a new record low pace. The embattled housing industry, which enjoyed a five-year boom, is now on pace to construct the fewest new homes and apartments since the end of World War II.

The Commerce Department reported Wednesday that construction of new homes and apartments dropped to an annual rate of 791,000 units from an upwardly revised September rate of 828,000 units. Previously, the slowest pace had been in January 1991, when the country was in recession and going through a similar housing correction.

Analysts surveyed by Thomson Reuters had expected construction to fall to a rate of 780,000 units. It was the fourth-straight monthly drop.

The declines in construction last month were led by a 31 percent drop in the Northeast, where construction of single family homes fell to a new record low. They also dropped 13.7 percent decline in the Midwest, but rose 7.5 percent in the West and a 1.5 percent in the South.

Tighter lending standards and more potential buyers waiting for lower prices have dramatically reduce the pool of them., an absence felt acutely by homebuilders such as D.R. Horton Inc.(NYSE:DHI), Beazer Homes Inc. (NYSE:BZH), Pulte Homes Inc. (NYSE:PHM) and Centex Corp.(NYSE:CEN)

These homebuilders have asked Congress to take steps that go beyond recapitalizing banks in order to try to reduce foreclosures. They have asked lawmakers to enact new incentives such as a 10 percent tax credit of up to $22,000 for homebuyers that purchase a home over the next year, and a temporary interest-rate reduction on 30-year mortgages. Unlike automakers, who want loans for operations, the builder are trying to get reluctant homebuyers back into the market.
Specifically, the group is asking for a .